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ecent Site Selection research into eastern Germany's work- force attributes reveals a work ethic on the part of employees that industries of all stripes consider desirable. The "nine- to- five and never on weekends" attitude may be commonplace elsewhere in Europe – and even in Germany – but it's rare in the former German Democratic Republic. In the federal state of Saxony, this hard- working labor pool has helped cultivate an automotive industry (think Porsche, Volkswagen, BMW and countless suppliers) that chooses to stay put in Dresden,

Peter Claussen

Leipzig and other industrial centers, even as other parts of Eastern Europe claim their share of direct investment in the automotive sector.
   "Saxony has a significant labor- cost advantage over West German states and over some other European countries," says Peter Claussen, vice president, BMW Group, and plant manager at BMW Plant Leipzig. "It does not have a general labor- cost advantage over all other European countries. In some of the Eastern European countries nearby, such as the Czech Republic, labor cost is at approximately 25 percent of the German level," he explains. "But there are significant advantages in Saxony, such as working time flexibility, and a highly trained, skilled and motivated labor force."
   Indeed, the role of labor in achieving production goals was central to BMW's choosing Leipzig over more than 250 other locations in Europe for production of the 3 Series. (Production of the 1 Series began in early 2007.) But other factors played key roles as well, not the least of which was the location's proximity to other BMW facilities and suppliers in Bavaria and elsewhere in Germany. Quality of the local infrastructure, availability of qualified technical personnel and proximity to BMW's sales network and customers were also important criteria.    But as Helmut Panke, BMW's chairman of the board, explained at the Leipzig plant's opening in May 2005, "The critical issue that led us to decide in favor of this site was the fact that labor representatives and management were able to work together constructively to agree on the 'BMW Formula for Work.'
   "The formula permits a weekly operation of the plant from 60 to 140 hours," he explained.

BMW implemented an innovative new labor contract at its new Leipzig facility, which would have been hard or impossible to accomplish at sites elsewhere.

"Various synchronized working time models de- link the individual working time of associates from the machine run time of the plant. This way, we can increase the use of installed capacities by up to 40 percent. This, in turn, facilitates a great deal of flexibility for us and makes a significant contribution to our achieving a competitive productivity level."
   In other words, the plant can be operated almost on an as- needed basis.
   "This means labor cost at approximately 25 percent under the BMW standard in Bavaria – Munich and Regensburg – plus more flexibility at lower cost," adds Claussen. "In terms of flexibility of working time, shift models, changes of production volume and so forth, easy solutions are possible in Saxony. This might not be feasible in the same way in other regions in Europe." In mid- 2006, about 570 vehicles were produced daily and delivered to customers on four continents. Production will reach 650 vehicles per day in 2007.
   Also in Leipzig, Porsche AG is expanding its Cayenne model production facility to accommodate a new, four- door model, the Panamera, which will hit the streets in 2009. Porsche launched a 269,107- sq.- ft. (25,000- sq.- m.), €120- million expansion in September 2006 that will enable the facility to add 600 jobs; 300 currently work on the Cayenne. A 322,928- sq.- ft. (30,000- sq.- m.) logistics center is also planned for the site.
   "Leipzig was and is the best choice we could have made," says Dr. Wendelin Wiedeking, president and CEO of Porsche AG. "We found ideal infrastructure here, and we were also impressed with the efficiency and flexibility with which the government authorities of Saxony and the City of Leipzig went about their work." Porsche declined state subsidies with which to finance the project, but "I can still say that the investment in our new production center in Leipzig was a worthwhile decision which continues to pay dividends for our company," said Wiedeking
   And speaking of subsidies, start- up investments in Saxony are eligible for a 30- percent EU support subsidy in all locations other than Leipzig and Dresden, where 26- percent and 23- percent programs are available respectively.

   Suppliers to Saxony's automotive industry tell a similar story.
   "The labor costs in Saxony are, indeed, 20 to 25 percent lower than in other Western European countries or in the other federal states of West Germany," says Dieter Pfortner, managing director of Magnetto Automotive Deutschland GmbH, an auto parts supplier located in Treuen, western Saxony. Employees typically work 38 hours per week in Saxony, compared to 35 in western Germany, notes Pfortner. "This is a result of agreements between the trade associations and the labor unions. But it is also a result of agreements between a lot of companies and their employees concerning wages and working time in order to lead the company out of a difficult economic situation."
   Do Saxony workers ever seek greener pastures elsewhere? They do, says Pfortner,

Saxony exports quality products, not just automotive products, says Dieter Pfortner, managing director at Magnetto Automotive Deutschland GmbH, one of many suppliers to Saxony's automotive industry.

"but this trend is now declining, and many qualified workers are returning step by step."
   Pfortner says there is more to Saxony's allure than affordable labor and logistics links for moving resources in and finished products out of the region. "Site selectors would also find attractive land prices; high flexibility in authorization procedures, especially concerning new investments, on the part of local authorities; close collaboration of industry and scientific institutions at universities in Dresden, Chemnitz, Leipzig and Zwickau; and an excellent, existing network of services, especially in the automotive industries in these cities."
   Still, plenty of investors will naturally look at adjacent areas, such as the Czech Republic, Poland and other German states in the hope of finding even- more- suitable locations. In Pfortner's experience at Magnetto Automotive, they may be wasting their time. "In 2006," he explains, "Saxony had the highest industrial development rate relative to all other German Federal states." The presence of Volkswagen, BMW, Porsche, major suppliers and a rapidly growing microelectronics industry keep investment in the region percolating. The universities are supplying an educated work force to a labor pool already well stocked.
   Furthermore, says Pfortner, the international complexity of the automotive industry means that high- quality Saxon products have a reputation to uphold around the world. "This quality awareness is for me a clear difference between Saxony and the mentality that can be found in some Eastern European countries."

This editorial profile of investment opportunities in Saxony, Germany, was prepared by the staff of Conway Data under the auspices of Saxony- area economic developers. For more information about Saxony's automotive industry and to learn more about investing in Saxony, visit www.invest- in- saxony.com.